A report by ESG advisory firm Sustainable Square has provided critical insights into the evolving sustainability landscape across the Gulf Cooperation Council (GCC) over the last six years – it highlights a significant shift toward stakeholder-driven and leadership-led ESG transparency, underscoring the region’s maturing approach to sustainability.
ESG Transparency
According to the report, stakeholder expectations have emerged as the dominant driver for ESG disclosure in 2023, with an overwhelming 83 per cent of companies identifying it as a key factor. Regulatory compliance comes second, with 67 per cent of respondents acknowledging its influence, underlining the importance of robust regulatory frameworks in advancing ESG transparency.
Among the stakeholders, internal leadership is playing an increasingly prominent role in driving ESG accountability. The Board of Directors (69 per cent) and Top Management (63 per cent) were identified as the primary forces behind ESG transparency in GCC organisations, indicating a strong internal commitment to aligning business strategies with sustainability goals. The influence of Leadership is followed by the push from Investors (61 per cent) and Government/Regulators (58 per cent).
ESG Standards & Frameworks
Global frameworks continue to play a critical role in shaping ESG practices in the GCC. Adoption of the GRI Standards has surged from 57 per cent in 2018 to 79 per cent in 2023, making it the dominant reporting standard in the region.
Similarly, participation in the UN Global Compact (UNGC) has grown from 17 per cent to 42 per cent, reflecting an increasing alignment with global principles of corporate responsibility. ESG disclosure, a key metric of transparency, has risen sharply, with 91 per cent of companies now publicly sharing sustainability-related information compared to 75 per cent in 2018.
“Organisations in the GCC are at a pivotal moment where embracing ESG is about future-proofing their businesses and creating lasting value”, said Monaem Ben Lellahom, Founding Partner and Group CEO of Sustainable Square.
“The rising influence of boards and top management demonstrate a deeper understanding of sustainability as a business imperative. This evolution is not only transforming the region’s corporate culture but also positioning GCC businesses as credible players in the global ESG landscape.”
According to the report, 67 per cent of GCC companies are aware of the new IFRS Sustainability Standards, with 51% planning to adopt them, signalling growing alignment with global ESG trends. Meanwhile, awareness of the European Union’s Corporate Sustainability Reporting Directive (CSRD) remains limited, with 44 per cent of respondents unaware of its implications.
As well, only 14 per cent of respondents reported understanding the potential implications of EU’s Carbon Border Adjustment Mechanism (CBAM), highlighting the need for increased education on how global policies could impact GCC businesses.
Progress and Challenges in Net Zero and Climate Action
The report highlights that UAE, Saudi Arabia, and Oman are leading the way in net-zero initiatives. Companies are adopting strategies such as developing long-term transition plans, implementing energy efficiency measures, and leveraging innovative technologies. However, the high cost of transition remains a significant barrier, cited by 68 per cent of respondents as a primary challenge.
The Business Case for ESG
ESG integration continues to yield tangible benefits. Enhanced brand reputation (72 per cent) and improved investor relations (68 per cent) were the most cited advantages of adopting ESG practices. Furthermore, 70 per cent of companies reported a clear shift in consumer preferences toward businesses adhering to ESG standards. However, challenges persist, with 49 per cent of respondents identifying a lack of standardisation as a major hurdle and 42 per cent struggling to quantify the return on investment from ESG initiatives.
A Trusted Partner
As a leading ESG advisory firm, Sustainable Square brings a wealth of expertise and a proven track record of delivering successful projects across more than 15 markets. The firm leverages innovative tools like SQUARELY an ESG tech platform that streamlines reporting processes, enabling companies to meet ambitious sustainability goals efficiently. With its deep regional knowledge and global perspective, Sustainable Square is uniquely positioned to guide GCC organisations through the complexities of ESG performance and disclosure.
“At Sustainable Square, we remain committed to empowering organisations with the strategies, tools, and insights they need to thrive in this rapidly changing environment”, Monaem said. “Our report is designed to provide actionable insights that empower businesses to navigate the complexities of ESG while contributing to the region’s sustainable growth.”